Arafat has been under pressure from the US to reform the Palestinian Authority (PA), to ensure more transparency in its financial management and more accountability. In response to Arafat's speech, the legislative council started work immediately on a draft bill setting out reforms for the PA. The changes are said to include the creation of a post of prime minister, enforcing a clear separation between government agencies and Palestinian political factions and limiting the number of ministries. The parliament is also to draw up a schedule for elections.

'President Arafat will stay the president and the symbol of our authority, but he has to distribute some of his responsibilities,' Fatah legislator Hatem Abdel-Qader was quoted as saying.

The support among Palestinians for Arafat that was evident while Israel kept him isolated in Ramallah has evaporated since the restrictions on his movement were lifted at the start of May. He has faced criticism for the concessions he made to ensure his own release, and deeper discontent with his leadership style has risen to surface once more.

There are also signs of tensions inside the PA, as rival figures jockey for dominance. Mohamed Dahlan, head of Palestinian security in Gaza, has become embroiled in public rows with his West Bank counterpart Jibril Rajoub. Dahlan appears to enjoy support from Arab states, and visited Cairo in mid May for talks with Egyptian intelligence chief Omar Sulaiman, commonly regarded as the right-hand man of President Mubarak.

Israel has put on hold plans to invade Gaza. However, the new chief-of-staff of the Israel Defence Forces, Major General Moshe Ya'alon, has been quoted as saying that it is only a matter of time before a major assault is launched on Gaza.